Incentory Valuation Case Study Example | Topics and Well Written Essays - 250 words

Incentory Valuation - Case Study ExampleAccording to generally accepted chronicle principles (GAAPs) there are three acceptable methods of valuation. These include total cost (AVCO) and First-in-first-out (FIFO) and last-in-first-out (LIFO). However, International Accounting Standards (IAS) 2 does not permit the use of LIFO (BPP 2009, p.205). The method that we have adopted is AVCO. GAAPs and IAS 2 also get hold of that inventory be valued at the lower-of-cost-and- commercialise value (LCM) (Hoyle and Skender 2010). This means that if the market value had fallen down the stairs cost after the year end then the inventory would require an adjustment to market value. We thusly need to compare our valuation at 31st whitethorn 2010 which is $ cxx with the current market set of $146. Since Palermos valuation is lower then the market value, we will maintain our current valuation of $120 per case. As soon as we start paying $80 per case, the average cost will reduction as long as cost prices remain that way. This however, will not apply to 31st May 2010. Furthermore, if later on, we see a reduction in market value below our current average cost of $120, we will have no other choice but to reduce our valuation to market value and to write off as an expense. Otherwise, our valuation as it stands currently is in keeping with GAAPs and IASs. Sincerely, . nous Financial Officer References BPP. (2009).